HMRC has published details of the number of investigations that it is currently conducting in connection with the corporate criminal offences of failure to prevent the facilitation of tax evasion.
The figures show that as of 1 January 2023:
- HMRC is conducting 9 investigations into the corporate criminal offence with no charging decisions yet being made.
- A further 26 live opportunities are currently under review with 77 opportunities having been rejected.
HMRC also revealed that these live matters span 11 separate business sectors and straddle all of HMRC's customer groups. The business sectors involved include the accountancy sector, labour provision, transport and software providers.
In explaining why it had chosen not to pursue some cases, HMRC reported that in certain instances it had not established that a deliberate facilitation of tax evasion had occurred. HMRC also reported that in some cases the investigations had uncovered alternative tax and regulatory offences that it decided to pursue.
The corporate offences relating to the failure to prevent the facilitation of tax evasion came into force in 2017 under the Criminal Finances Act, but, to date, there have been no prosecutions for either of the corporate criminal offences.
HMRC has made it clear that it considers the behavioural changes that businesses put in place in response to the legislation to be one of the measures of its success. However, the absence of enforcement has led to questions about whether the Act actually has teeth - something widely considered essential if it is continued to drive change in behaviours.
The introduction of the offences under the Criminal Finances Act 2017 followed the Bribery Act 2010, which introduced the corporate offence of failure to prevent bribery - the first compliance-led offence in the UK. By contrast to the Criminal Finances Act 2017, the Bribery Act 2010 has led to a string of high profile enforcement actions, so the latest news that HMRC is conducting live investigations under the CFA 2017 will be watched closely.
The publication by HMRC follows news last week that the Government intends to introduce wider failure to prevent offences as part of the Economic Crime & Corporate Transparency Bill currently in Parliament. The introduction of such new criminal offences - including the failure to prevent fraud, false accounting and money laundering - would represent the most wide reaching and significant reform of corporate criminal liability and governance not seen since the introduction of the Bribery Act 2010. With corporate entities clearly in the legislature’s sights, it would seem prudent for action to be taken sooner rather than later to review existing procedures and make sure they are fit for purpose.
In September 2022, Mishcon co-edited and authored various chapters of the First Edition of the Global Investigations Review Guide to Compliance, which sets out compliance risks and best practice and is available here.